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Survey of Real Estate Trends

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					      Survey of
 Real Estate Trends
An Assessment by Senior Examiners and Asset Managers at Federal Bank and Thrift Regulatory Agencies


                                    JANUARY 2002 TO JUNE 2002
                                              National Highlights
       The Survey of Real Estate Trends summarizes the opinions of 252 senior examiners and
       asset managers at federal bank and thrift regulatory agencies on changes in the conditions
       of local real estate markets. This Survey covers conditions over the six-month period from
       January to June 2002 for single-family, multifamily, office, retail, and industrial property mar-
       kets in metropolitan areas across the nation.
       n    Respondents to the July 2002 survey continued to observe deterioration in the nation’s
            real estate markets during the first half of 2002, although the rate of deterioration was
            slower than in the last half of 2001.
       n    The results indicate that reports of worsening real estate conditions (as characterized by
            higher vacancy rates, lower market prices, or a slower pace of sales) nonetheless con-
            tinued to predominate.
       n    Improvements in current conditions were observed in the single-family sector, where
            respondents cited higher sales volumes and home sale prices than six months ago.
       n    Reports of market imbalance skewed strongly towards oversupply in the commercial
            markets, while reports of tight conditions continued in residential markets.
       n    Weakness in local office markets continued to be widespread according to the vast
            majority of respondents. Sixty-five percent reported worsening office market conditions,
            but a majority reported a decrease in speculative office construction, in apparent
            response to diminished demand in many U.S. markets.


   Introduction                                              estate property markets: single-family, multi-
                                                             family, office, retail, and industrial. The met-
   The condition of real estate markets has
                                                             ropolitan areas covered and the criteria
   been, and is likely to remain, an important
                                                             guiding participants’ responses are listed in
   determinant of credit risk for banks and thrifts.
                                                             the notes for the national results table at the
   Since early 1991 the FDIC has conducted a
                                                             end of this report.
   survey of field staff from all of the federal thrift
   and bank regulatory agencies about changes                Comparisons of survey results across differ-
   in the conditions of their local real estate mar-         ent periods or geographic areas must be
   kets. The purpose of the survey is to provide             interpreted carefully. The pool of respon-
   a timely indicator of changes in residential              dents may change from survey to survey, and
   and commercial real estate market condi-                  observations about a specific market’s activi-
   tions.                                                    ty reflect characteristics unique to that mar-
                                                             ket.
   The nationwide survey polls FDIC senior
   examiners and asset managers as well as                   Current Conditions in Real Estate
   bank examiners of the Federal Reserve
   Banks, the Office of the Comptroller of the               Markets
   Currency, and the Office of Thrift Supervision.           Respondents continued to observe excess
   Participants are asked broad qualitative                  supply most frequently in all property markets
   questions about conditions and trends in spe-             except single-family. Similar to the previous
   cific metropolitan areas in five distinct real            survey in January, reports of market imbal-


   Division of Insurance and Research                                       Cynthia Angell (202) 898-8548
   Internet address:                             Donald E. Powell
   World Wide Web, www.fdic.gov.                     Chairman
ance skewed strongly towards oversupply in                   ued to be scarce. The accompanying table
the commercial markets, while reports of tight               lists all metropolitan areas characterized as
conditions continued in residential markets.                 having excess supply.
The proportion of respondents who described                  Single-Family Real Estate Markets
                                                              n
single-family markets as tight, 33 percent,
was double the figure reported in January                         Existing home sales rebounded accord-
2002. The increase in such reports was                            ing to respondents in the July 2002 sur-
weighted towards responses of “some tight-                        vey, an increase also recorded by the
ness” rather than the more acute “a tight mar-                    National Association of Realtors.1 Thirty
ket.” As for multifamily markets, 15 percent                      percent of respondents reported that
observed supply conditions as tight, a slight                     sales had risen from six months ago, up
dip from the 17 percent reported in January.                      from 16 percent, while reports of slower
Forty-five percent said their local apartment                     sales were less frequent. Respondents
markets had too much supply, up from 36                           said that existing home sales were
percent in January.                                               increasing in Albany, Buffalo, Fargo,
                                                                  Hartford, Little Rock, Newark, Orange
Excess office space was reported by 78 per-                       County, Philadelphia, Sacramento, San
cent of respondents, down from 81 percent in                      Francisco, and Wilmington but were
January 2002. However, of those respon-                           decreasing in Des Moines, Fort Lauder-
dents who noted oversupply, the proportion                        dale, Grand Rapids, Greenville-Spartan-
whose response was the more serious                               burg, Indianapolis, Jackson, Kansas City,
“excess inventory” as opposed to “some                            Milwaukee, Norfolk, Oakland, Omaha,
excess capacity” jumped to 40 percent from                        Portland (OR), Raleigh, Salt Lake City,
25 percent in January 2002.                                       and West Palm Beach.
Reports of oversupply in retail and industrial
markets were somewhat more frequent than
six months ago. Excess supply in retail mar-
kets was observed by 68 percent of respon-                        1Existing 1- to 4-family homes sold at a seasonal-

dents, up from 65 percent. As for industrial                  ly-adjusted annual rate of 5.78 million units in the first
                                                              quarter of 2002 and 5.54 million units in the second
markets, 64 percent of respondents reported                   quarter, according to the National Association of
too much industrial space, up from 58 per-                    Realtors. These rates mark the highest quarterly lev-
cent. Local markets with tight supply contin-                 els of existing home sales ever recorded in the U.S.


                                    CURRENT CONDITION OF MARKETS

               Single-Family 33                  39                    27          1

                  Multifamily 15                 39                    45          1

                       Office 1         21                             78

                       Retail 1         31                             68

                   Industrial 2         33                             64          1

                                0        20        40        60         80         100
                                              Percent of Respondents

                               Tight Supply   In Balance    Excess Supply     Not Sure




Survey of Real Estate Trends                            2                                                    July 2002
            CURRENT CONDITIONS: EXCESS SUPPLY REPORTED IN METROPOLITAN AREAS
             Metro Area             Single-Family      Multifamily      Office         Retail     Industrial
  Albany                                                    X                                          X
  Albuquerque                            X                                               X
  Atlanta                                X                  X              X             X             X
  Austin                                 X                  X              X
  Baltimore                                                                X             X
  Billings                                                                               X
  Birmingham                                                               X
  Boston                                                                   X             X
  Charlotte                                                 X              X             X
  Chicago                                                                  X             X
  Cincinnati                                                               X             X             X
  Cleveland                                                                X             X             X
  Columbus                                                  X              X             X             X
  Dallas                                                                   X             X             X
  Denver                                 X                                 X
  Des Moines                             X                                 X
  Detroit                                                                  X             X             X
  Fargo                                                                                  X
  Grand Rapids                           X                                               X             X
  Greenville-Spartanburg                 X                  X              X
  Honolulu                                                                 X             X
  Houston                                                                  X             X
  Indianapolis                           X                  X              X             X
  Kansas City                                               X              X             X
  Little Rock                                                              X             X
  Las Vegas                                                                X             X
  Los Angeles                                                              X                           X
  Louisville                                                                             X
  Miami                                                                    X                           X
  Milwaukee                                                                X             X             X
  Minneapolis                                               X              X             X
  Nashville                                                 X              X             X
  New Orleans                                                                            X
  New York City                                                            X                           X
  Oakland                                X
  Oklahoma City                                                                          X             X
  Omaha                                  X                  X              X             X             X
  Orange County                                                            X
  Orlando                                X                  X              X                           X
  Phoenix                                                   X              X                           X
  Pittsburgh                                                               X                           X
  Portland, OR                                                             X
  Providence                                                                             X
  Raleigh                                                   X              X             X             X
  Richmond                                                                 X             X             X
  Sacramento                                                X              X
  Salt Lake City                         X                  X              X             X             X
  San Diego                                                                X
  San Francisco                                                            X                           X
  Seattle                                X                  X              X             X             X
  Sioux Falls                                               X
  St. Louis                                                                X             X
  Tulsa                                                     X              X             X
  Washington DC/MD/VA                                                      X
  Wilmington                                                               X


  Note: Excess supply as indicated by more than 50 percent of respondents who cite either “excess Inventory” or
  “some excess capacity.” See national results table for survey questions.




July 2002                                             3                            Survey of Real Estate Trends
                                ASSESSMENT OF SINGLE-FAMILY MARKETS
                                         Compared to Six Months Ago

              Sales: Existing          30                  42               28

                  Sales: New           32                  40               26 2

                Construction           28                  44               27 1

             Prices: Existing          51                  41                8

                 Prices: New           54                  40                 51
                                0       20       40        60          80        100
                                             Percent of Respondents

                                    Increasing   Same     Decreasing    Not Sure



n   For new homes, 32 percent noted an                          percent). Higher prices were observed
    increase in sales (up from 19 percent)                      throughout the country. Eight percent
    while 26 percent observed a decrease in                     reported decreasing sales prices for
    sales (down from 46 percent). Sales of                      existing homes (Des Moines and
    new homes were reported to be higher                        Greenville-Spartanburg) and slightly
    than six months earlier in Albany, Billings,                fewer, five percent, saw price erosion in
    Buffalo, Fargo, Hartford, Honolulu, Jack-                   new homes (Des Moines, Greenville-
    son, Newark, Orange County, Philadel-                       Spartanburg, and Salt Lake City).
    phia, Providence, Sacramento, and
    Wilmington but lower in Fort Lauderdale,
                                                            n   Among the comments from respondents
                                                                were observations that, in terms of price
    Grand Rapids, Greenville-Spartanburg,                       movement and sales activity, the strength
    Indianapolis, Little Rock, Oakland,                         of the single-family sector appeared con-
    Raleigh, Salt Lake City, San Juan,                          centrated on mid- and lower-end housing
    Seattle, and West Palm Beach.                               rather than the upper-end market.
n   Although 44 percent of respondents                      n   Single-family markets had, by far, the
    observed no change in construction of                       highest proportion of respondents noting
    single-family homes, 28 percent noted an                    better overall conditions, at 27 percent.
    increase, more than double the propor-                      This figure was more than twice the pro-
    tion in the previous survey. Renewed                        portion reported in the January 2002 sur-
    homebuilding activity was noted in                          vey, at 10 percent. The more favorable
    Albany, Billings, Buffalo, Fargo, Honolulu,                 assessment of the single-family sector
    Jackson, Newark, Philadelphia, and                          reflected respondents’ observations of
    Wilmington. Twenty-seven percent of                         higher sales volumes and higher home
    respondents viewed a decrease in resi-                      sale prices than six months ago.
    dential construction over the previous six                  Respondents commented on the relative
    months, citing declines in Denver, Detroit,                 health of the market compared to, for
    Fort Lauderdale, Grand Rapids,                              example, the office sector, attributing it in
    Indianapolis, Phoenix, Portland (ME),                       large part to continued low mortgage
    Oakland, San Juan, and Seattle.                             interest rates. Still, respondents on both
n   Increasing sale prices for both existing                    coasts noted the potential for price bub-
     and new homes were reportedly much                         bles in their local single-family markets.
     more frequent, with a majority of respon-                  About one-quarter of respondents (24
     dents seeing gains in prices for existing                  percent) said conditions were worse, in
     homes (51 percent, up from 24 percent)                     contrast to 41 percent in January.
     and new homes (54 percent, up from 31



Survey of Real Estate Trends                          4                                             July 2002
Multifamily Real Estate                                               while only 6 percent noted better condi-
Markets                                                               tions, a slight dip from January’s seven
n   Vacancy rates in multifamily housing mar-
                                                                      percent. Comments on rising vacancies
                                                                      and more frequent concessions under-
    kets were widely reported as increasing                           scored these views of weakness in the
    from six months earlier. Forty-three per-                         multifamily sector.
    cent of respondents reported increasing
    vacancies, up from 35 percent in January
                                                                 Office Real Estate Markets
    2002, while seven percent noted that
    vacancies had decreased. Metropolitan                        n    Forty-four percent of the respondents
    areas cited for rising multifamily vacan-                         reported no change in office rental rates
    cies included Albany, Atlanta, Austin,                            over the previous six months, the same
    Charlotte, Denver, Grand Rapids,                                  proportion as in the January 2002 survey.
    Indianapolis, Minneapolis, Phoenix,                               In markets where rents fluctuated, just
    Omaha, Orlando, Raleigh, Sacramento,                              seven percent noted an increase in rental
    Salt Lake City, San Francisco, Seattle,                           rates, in Buffalo, Hartford, and Las
    Sioux Falls, and Tampa.                                           Vegas, and 47 percent said office rental
n   Forty-six percent of respondents reported                         rates were reduced from six months ear-
                                                                      lier. Lower office rents were observed in
    no change in multifamily residential con-
    struction. However, new apartment con-                            Atlanta, Birmingham, Boston, Chicago,
    struction was noted by 15 percent, up                             Columbus, Dallas, Denver, Detroit,
    from six percent in the January 2002 sur-                         Indianapolis, Los Angeles, Miami,
    vey, even as vacancies in multifamily                             Minneapolis, Nashville, New York City,
    markets were on the rise. Higher con-                             Omaha, Orange County, Orlando, Salt
    struction was mentioned in Albany,                                Lake City, San Diego, San Francisco,
    Portland (OR), and Sioux Falls. One-                              Seattle, and Wilmington. It should be
    third noted a slowdown in apartment                               noted that, of the respondents who noted
    building, down from 44 percent in the                             decreasing rental rates, 16 percent
    January survey.                                                   described rates as “a lot lower” than six
n   Observations of general conditions in
                                                                      months earlier, commenting on “rapidly
                                                                      declining rents” and “markedly lower
    local multifamily markets in July were                            rents.”
    similar to the results recorded in January.
    Although 51 percent of respondents                           n    The majority of respondents (52 percent)
    described conditions as the same, the                             noted that the volume of speculative con-
    remainder who reported movement con-                              struction of office buildings was reduced
    tinued to cite deterioration much more                            from six months earlier, up from 48 per-
    frequently than improvement. Forty-three                          cent, in apparent response to continued
    percent said conditions were worse, an                            weakness in the sector. In addition,
    uptick from 41 percent in the last survey,                        almost 30 percent of those reporting a


                                 MULTIFAMILY REAL ESTATE MARKETS
                                        Compared to Six Months Ago

                  Vacancy
                    Rates        43                         48                    72


              Construction       15                         46            33          6

                             0        20          40             60        80         100
                                               Percent of Respondents

                                  Increasing     Same       Decreasing     Not Sure




July 2002                                               5                                 Survey of Real Estate Trends
                                         OFFICE REAL ESTATE MARKETS
                                             Compared to Six Months Ago


                 Rental Rates        7           44                  47             2


                  Speculative
                 Construction
                                     8           35                  52             5


                 Sales Prices
                 of Properties
                                     5           53                  34             8

                                 0          20        40        60          80      100
                                                  Percent of Respondents

                                         Increasing   Same     Decreasing    Not Sure



    decline in speculative construction said                     n   The accompanying map displays respon-
    that it was “a lot lower.” Nonetheless,                          dents’ evaluations of changes in office
    eight percent of respondents observed                            market conditions in metropolitan areas.
    increasing speculative office construction                       Only in one city, Newark, were office con-
    over the previous six months, citing                             ditions viewed as better than six months
    Greenville-Spartanburg and San Diego.                            ago. In the areas not named, there was
    Thirty-five percent saw no change.                               no majority opinion that overall conditions
n   Sales prices of office properties held                           had improved or deteriorated.
    steady, according to just over one-half of
    respondents (53 percent). However, 34                       Retail Real Estate Markets
    percent of respondents said prices were                      n   The majority of respondents (61 percent)
    decreasing somewhat, and only five per-                          saw stable retail rental rates. However,
    cent reported rising prices, notably in                          rent breaks were still offered according to
    Hartford. Price declines in office building                      33 percent who noted declining rental
    sales were seen in Atlanta, Austin,                              rates, but this was down from 36 percent
    Detroit, Indianapolis, New York City,                            in the previous survey. Respondents
    Phoenix, Raleigh, Salt Lake City, San                            cited lower rents in Atlanta, Cincinnati,
    Francisco, Seattle, and Wilmington.                              Columbus, Dallas, Omaha, Raleigh, Salt
n   Respondents’ views on general office                             Lake City, and Seattle. Only four percent
                                                                     said retail rental rates were “a little high-
    market conditions were quite similar to
    those reported in January 2002, with little                      er,” mentioning Buffalo and Las Vegas.
    change in the proportions noting condi-                      n   Sales prices of retail properties held
    tions as better, the same, or worse. What                        steady over the previous six months,
    was notable, however, was that the sig-                          according to 64 percent of respondents,
    nificantly more frequent reports of deteri-                      up from 59 percent in the previous sur-
    oration continued to be so widespread, at                        vey. However, 29 percent said that retail
    65 percent. According to comments,                               sale prices were lower (down from 31
    views of weakness were based on the                              percent), notably in Charlotte, Cleveland,
    prevalence of sublease space, rising                             Columbus, Omaha, Raleigh, Salt Lake
    vacancies, and declining rental rates.                           City, and Seattle. Only two percent said
    Only two percent of respondents noted                            that sale prices had increased, and just
    some       emerging      improvement—an                          moderately at that.
    increase, albeit very slight, from one per-
    cent in the last survey.




Survey of Real Estate Trends                               6                                            July 2002
                                               CHANGES IN OFFICE MARKET CONDITIONS
                                                   In Metropolitan Areas Over Past Six Months



            Seattle




          Portland                                                              Minneapolis
                                                                                                                                                              Portland

                                                                                                                                                            Boston
                                                                                                                     Detroit
                                                                        Omaha                     Chicago
                                                                                                                          Columbus                   New York City
                                  Salt Lake City
                                                                                                                                Pittsburgh           Newark
                                                                                                      Indianapolis
                                                                                                                                   Baltimore
                                                       Denver                                                                                     Wilmington
                                                                                                                   Cincinnati
                                                                                                                                               Washington DC/MD/VA
San Francisco
                         Las Vegas
                                                                                                       Nashville                        Raleigh
                                                                                                                                  Charlotte
          Los Angeles
          Orange County                                                                                              Atlanta
                                                                                                     Birmingham
                    San Diego        Phoenix
                                                                          Dallas
                                                                                                                                                         Better
                                                                         Austin Houston                                                                  Same
                                                                                                                                 Orlando
                                                                                                                                                         Worse



                                                                                                                                   Miami




      n    Reports of worsening conditions in local                                       tinued to describe retail conditions as the
           retail markets continued to far outweigh                                       same compared to six months ago, up
           reports of improvement, with 43 percent                                        from 44 percent in January 2002.
           noting deterioration compared to just two                                      Respondents commented that, despite
           percent seeing better conditions.                                              store closings and retail bankruptcies
           However, the proportion seeing weak-                                           (some reaching national headlines), the
           ness was less than in the January 2002                                         retail sector was relatively steady as con-
           survey (down from 55 percent). Over                                            sumer spending held up better than
           one-half of respondents (55 percent) con-                                      expected.


                                                       RETAIL REAL ESTATE MARKETS
                                                         Compared to Six Months Ago


                                Rental Rates 4                     61                      33               2


                                Sales Prices
                                              2                    64                      29               5
                                of Properties

                                                   0      20        40             60           80          100
                                                                Percent of Respondents

                                                          Higher    Same        Lower         Not Sure




     July 2002                                                           7                                           Survey of Real Estate Trends
Industrial Real Estate Markets                                      tion. The majority of respondents in July (56
n   Rental rates for industrial properties were
                                                                    percent) noted no change in conditions.
    described as largely unchanged from the
    previous six months according to the majori-              Market Dislocation
    ty of respondents (56 percent) citing stable              When asked to assess potential signs of a trou-
    rents. Reports of lower rental rates were                 bled real estate market, respondents continued
    similar to those of six months ago, at 41 per-            to note foreclosures and bankruptcies, and
    cent. Lower rates were observed in Albany,                longer leasing times than six months ago,
    Atlanta, Charlotte, Dallas, Detroit, Kansas               although many reported no change.
    City, Miami, Omaha, Phoenix, Raleigh,
    Richmond, Salt Lake City, San Francisco,
                                                               n    The majority of respondents (61 percent)
                                                                    reported that foreclosures on commercial
    and Seattle. Just two percent said that                         real estate loans continued at about the
    industrial rents had increased.                                 same pace as six months earlier. Of those
n   Sales prices of industrial properties remained                  seeing a change in the pace of foreclosures,
    steady, with 65 percent of respondents not-                     18 percent said they were somewhat more
    ing sale prices as unchanged. In January                        frequent and only two percent said they were
    2002, 62 percent observed stable prices.                        somewhat less.
    The difference shifted entirely to reports of              n    Forty-three percent of respondents reported
    moderately increasing sales prices, albeit                      no increase in commercial and retail bank-
    slight at four percent but a boost from                         ruptcies from levels noted in January 2002.
    January’s zero reports of price gains. Thirty                   However, 37 percent observed somewhat
    percent (down from 33 percent) said industri-                   more bankruptcies now compared to six
    al sales prices were lower, mentioning                          months ago, far outweighing the two percent
    Albany, Charlotte, Dallas, Detroit, Kansas                      who said that bankruptcies were less than in
    City, Phoenix, Raleigh, Richmond, San                           the previous survey.
    Francisco, and Seattle.
                                                               n
n
                                                                    The length of time required to lease a prop-
    When asked about general conditions in local                    erty was widely described by almost 49 per-
    industrial markets, far more respondents saw                    cent as somewhat longer now than in the
    weaker conditions than improving conditions                     previous survey, compared to almost three
    (42 percent versus two percent) but this was                    percent who observed somewhat shorter
    a slight improvement from the January 2002                      times. Thirty-one percent reported no
    survey when 50 percent reported deteriora-                      change in lease time.


                                       INDUSTRIAL REAL ESTATE MARKETS
                                           Compared to Six Months Ago



                   Rental Rates 2               56                     41            1


                   Sales Prices
                                 4              65                     30            1
                   of Properties

                                   0       20        40        60          80        100
                                                 Percent of Respondents

                                          Higher     Same     Lower       Not Sure




    Survey of Real Estate Trends                          8                                          July 2002
               NATIONAL RESULTS FROM THE SURVEY OF REAL ESTATE TRENDS
                                              Percent of Respondents
                                                                                     Six-Month Period Ending:
                                                                             06/00    12/00   06/01    12/01    06/02
SINGLE-FAMILY
How would you characterize the current        A tight market                  15.0     7.7      5.9      1.6      7.0
single-family market?                         Some tightness                  30.0    23.8     23.7     14.2     26.2
                                              Supply and demand in balance    40.3    51.1     42.3     51.6     39.3
                                              Some excess capacity            13.7    14.9     25.3     31.1     24.9
                                              Excess inventory                 0.9     2.6      2.8      1.6      2.2
                                              Not sure                         0.0     0.0      0.0      0.0      0.4
How would you characterize the current        A lot higher                     1.3     0.0      1.2      0.4      1.3
volume of existing single-family home sales   A little higher                 23.6    17.0     26.9     16.1     28.4
now compared with 6 months ago?               About the same                  44.6    46.4     44.7     39.8     42.4
                                              A little lower                  29.6    34.9     24.9     39.0     26.6
                                              A lot lower                      0.0     1.3      1.6      3.9      0.9
                                              Not sure                         0.9     0.4      0.8      0.8      0.4
How would you characterize the current        A lot higher                     1.3     0.9      1.2      0.0      2.6
volume of new single-family home sales        A little higher                 26.2    14.5     26.5     18.9     29.7
now compared with 6 months ago?               About the same                  45.5    46.4     41.9     33.5     40.2
                                              A little lower                  26.2    36.6     26.5     43.3     24.5
                                              A lot lower                      0.4     0.9      2.0      3.1      0.9
                                              Not sure                         0.4     0.9      2.0      1.2      2.2
How would you characterize the current        A lot higher                     3.0     0.9      0.4      0.0      2.2
volume of single-family new home              A little higher                 20.6    13.6     22.1     11.8     26.2
construction now compared with 6 months       About the same                  49.4    42.6     50.2     42.5     43.2
ago?                                          A little lower                  24.9    39.6     24.1     41.3     26.2
                                              A lot lower                      0.9     2.1      2.4      2.4      0.9
                                              Not sure                         1.3     1.3      0.8      2.0      1.3
How would you characterize the sales          A lot higher                     5.6     1.7      2.8      1.6      4.8
prices of existing single-family homes now    A little higher                 51.5    41.3     43.1     22.8     46.7
compared with 6 months ago?                   About the same                  35.6    47.2     38.7     54.7     40.6
                                              A little lower                   6.9     9.8     13.8     18.5      7.9
                                              A lot lower                      0.0     0.0      0.8      1.2      0.0
                                              Not sure                         0.4     0.0      0.8      1.2      0.0
How would you characterize the sales prices   A lot higher                     5.2     1.7      2.8      1.2      4.8
of new single-family homes now compared       A little higher                 55.4    45.1     48.2     29.5     49.3
with 6 months ago?                            About the                       35.2    48.9     39.5     53.1     40.2
                                              A little lower                   3.0     3.8      7.1     13.4      5.2
                                              A lot lower                      0.4     0.0      0.4      1.2      0.0
                                              Not sure                         0.9     0.4      2.0      1.6      0.4
What would you say is the general condition   A lot better                     1.3     1.3      0.8      0.8      3.5
of the single-family market now compared      A little better                 23.6    15.7     19.0      9.1     23.1
with 6 months ago?                            About the same                  57.9    56.2     53.0     48.8     48.9
                                              A little worse                  16.7    26.4     25.3     40.2     23.1
                                              A lot worse                      0.0     0.4      1.6      0.8      0.9
                                              Not sure                         0.4     0.0      0.4      0.4      0.4
MULTIFAMILY
How would you characterize the current        A tight market                  11.7     5.6      8.7      1.2      1.9
multifamily market?                           Some tightness                  27.8    24.2     19.7     16.2     13.4
                                              Supply and demand in balance    45.0    50.3     49.1     46.2     38.9
                                              Some excess capacity            14.4    18.6     20.8     32.9     39.5
                                              Excess inventory                 0.6     1.2      1.7      2.9      5.7
                                              Not sure                         0.6     0.0      0.0      0.6      0.6
How would you characterize current            A lot higher                     0.0     0.0      1.2      1.2      2.5
`apartment vacancy rates now compared         A little higher                 17.8    15.5     25.4     33.5     40.1
with 6 months ago?                            About the same                  62.2    70.2     59.0     54.9     48.4
                                              A little lower                  18.3    11.8     11.0      9.8      7.0
                                              A lot lower                      0.0     1.2      1.7      0.0      0.0
                                              Not sure                         1.7     1.2      1.7      0.6      1.9
How would you characterize the current        A lot higher                     1.7     1.2      0.0      0.0      0.0
volume of rental apartment construction       A little higher                 22.2    11.8     17.3      5.8     15.3
now compared with 6 months ago?               About the same                  51.7    54.7     55.5     48.0     45.9
                                              A little lower                  19.4    28.0     22.5     40.5     28.7
                                              A lot lower                      1.7     0.6      2.3      3.5      4.5
                                              Not sure                         3.3     3.7      2.3      2.3      5.7
What would you say is the general condition   A lot better                     1.7     0.0      0.0      0.0      0.0
of the multifamily market now compared        A little better                 17.2    12.4     13.9      6.9      6.4
with 6 months ago?                            About the same                  72.2    74.5     65.3     51.4     50.3
                                              A little worse                   8.9    12.4     19.7     39.3     41.4
                                              A lot worse                      0.0     0.6      1.2      1.7      1.9
                                              Not sure                         0.0     0.0      0.0      0.6      0.0




 July 2002                                              9                             Survey of Real Estate Trends
                 NATIONAL RESULTS FROM THE SURVEY OF REAL ESTATE TRENDS
                                                    Percent of Respondents
                                                                                           Six-Month Period Ending:
                                                                                   06/00    12/00   06/01    12/01    06/02
OFFICE
How would you characterize the current              A tight market                   9.9     4.2      0.6      0.0     0.0
office market?                                      Some tightness                  21.6    13.1      4.5      4.4     0.6
                                                    Supply and demand in balance    37.4    51.2     30.7     15.5    20.8
                                                    Some excess capacity            28.1    28.0     54.7     59.7    48.8
                                                    Excess inventory                 2.9     3.6      9.5     20.4    29.8
                                                    Not sure                         0.0     0.0      0.0      0.0     0.0
How would you characterize rental rates for         A lot higher                     5.3     0.0      0.0      0.0     1.8
office space now compared with 6 months             A little higher                 26.9    22.6     10.1      3.3     4.8
ago?                                                About the same                  59.6    71.4     53.1     44.8    44.0
                                                    A little lower                   7.0     5.4     33.0     40.9    39.3
                                                    A lot lower                      0.0     0.0      3.4      7.7     7.7
                                                    Not sure                         1.2     0.6      0.6      3.3     2.4
How would you characterize the current              A lot higher                     2.3     1.2      1.1      1.7     0.0
volume of speculative office construction           A little higher                 18.1    17.3     15.1     12.7     8.3
(i.e., not presold or preleased) now                About the same                  56.1    47.6     47.5     34.3    35.1
compared with 6 months ago?                         A little lower                  15.8    24.4     23.5     35.9    36.9
                                                    A lot lower                      2.3     3.0      6.1     12.2    14.9
                                                    Not sure                         5.3     6.5      6.7      3.3     4.8
How would you characterize the sales prices         Increasing rapidly               0.6     0.0      0.0      0.0     0.0
of a common class of office properties?             Increasing moderately           33.3    21.4     11.2      3.9     4.8
                                                    Holding steady                  57.9    67.9     62.0     50.8    53.0
                                                    Decreasing moderately            2.3     6.0     19.0     37.6    33.3
                                                    Decreasing steadily              0.6     0.0      0.6      1.7     1.2
                                                    Not sure                         5.3     4.8      7.3      6.1     7.7
How common are leasing concessions (such            A lot more common                0.6     0.0      4.5     11.6     8.9
as free rent, tenant finish, build out, etc.) for   A little more common             8.2    10.1     33.0     42.0    46.4
office space now compared with 6 months             About the same                  57.9    66.7     44.7     32.6    33.9
ago?                                                A little less common            15.2     6.5      2.8      0.0     0.6
                                                    A lot less common                2.9     1.8      0.6      0.0     0.6
                                                    No concessions are offered       5.8     6.0      3.9      2.2     1.8
                                                    Not sure                         9.4     8.9     10.6     11.6     7.7
What would you say is the general condition         A lot better                     0.0     0.0      0.0      0.0     0.0
of the office market now compared with 6            A little better                 17.5    14.3      5.0      1.1     1.8
months ago?                                         About the same                  71.9    69.0     46.4     32.6    32.7
                                                    A little worse                  10.5    15.5     44.1     53.6    54.2
                                                    A lot worse                      0.0     1.2      4.5     12.7    11.3
                                                    Not sure                         0.0     0.0      0.0      0.0     0.0
RETAIL
How would you characterize the current              A tight market                   0.7     0.0      0.0      0.0     0.0
retail market?                                      Some tightness                  17.5    10.4      5.2      2.1     0.7
                                                    Supply and demand in balance    51.7    54.5     50.7     33.3    31.4
                                                    Some excess capacity            25.9    33.8     40.3     56.9    62.0
                                                    Excess inventory                 2.8     1.3      3.0      7.6     5.8
                                                    Not sure                         1.4     0.0      0.7      0.0     0.0
How would you characterize rental rates for         A lot higher                     0.0     0.0      0.0      0.0     0.0
retail space now compared with 6 months             A little higher                 21.0    19.5      6.7      1.4     3.6
ago?                                                About the same                  69.2    67.5     64.9     58.3    60.6
                                                    A little lower                   6.3     9.7     23.1     33.3    32.8
                                                    A lot lower                      0.0     0.0      0.0      2.8     0.7
                                                    Not sure                         3.5     3.2      5.2      4.2     2.2
How would you characterize sales prices of          Increasing rapidly               0.0     0.0      0.0      0.0     0.0
retail properties?                                  Increasing moderately           22.4    15.6      7.5      4.2     2.2
                                                    Holding steady                  67.8    72.7     64.2     58.3    64.2
                                                    Decreasing moderately            4.2     7.1     18.7     30.6    28.5
                                                    Decreasing steadily              0.0     0.0      0.0      0.7     0.0
                                                    Not sure                         5.6     4.5      9.7      6.3     5.1
How common are leasing concessions (such            A lot more common                0.0     0.6      1.5      3.5     2.2
as free rent, tenant finish, build out, etc.) for   A little more common             8.4    11.0     26.1     43.1    37.2
retail space now compared with 6 months             About the same                  65.7    65.6     51.5     36.8    46.0
ago?                                                A little less common             7.0     4.5      1.5      1.4     0.7
                                                    A lot less common                0.7     0.6      0.0      0.0     0.0
                                                    No concessions are offered       5.6     4.5      3.7      3.5     3.6
                                                    Not sure                        12.6    13.0     15.7     11.8    10.2
What would you say is the general condition         A lot better                     0.0     0.0      0.0      0.0     0.0
of the retail market now compared with 6            A little better                 10.5     7.1      3.0      1.4     2.2
months ago?                                         About the same                  78.3    75.3     62.7     44.4    54.7
                                                    A little worse                  11.2    16.9     34.3     51.4    42.3
                                                    A lot worse                      0.0     0.6      0.0      2.8     0.7
                                                    Not sure                         0.0     0.0      0.0      0.0     0.0




  Survey of Real Estate Trends                                10                                                 July 2002
                 NATIONAL RESULTS FROM THE SURVEY OF REAL ESTATE TRENDS
                                                      Percent of Respondents
                                                                                                   Six-Month Period Ending:
                                                                                          06/00    12/00   06/01   12/01    06/02
INDUSTRIAL
How would you characterize the current              A tight market                          4.3      1.1     0.0     0.0     0.0
industrial market?                                  Some tightness                         24.7     11.0     5.4     2.0     2.4
                                                    Supply and demand in balance           57.0     65.9    60.2    39.0    32.9
                                                    Some excess capacity                   10.8     19.8    29.0    47.0    50.0
                                                    Excess inventory                        2.2      2.2     5.4    11.0    13.4
                                                    Not sure                                1.1      0.0     0.0     1.0     1.2
How would you characterize rental rates for         A lot higher                            2.2      0.0     0.0     0.0     0.0
industrial space now compared with 6                A little higher                        26.9     15.4     5.4     2.0     2.4
months ago?                                         About the same                         64.5     72.5    68.8    55.0    56.1
                                                    A little lower                          3.2      9.9    20.4    39.0    39.0
                                                    A lot lower                             1.1      1.1     2.2     3.0     1.2
                                                    Not sure                                2.2      1.1     3.2     1.0     1.2
How would you characterize sales prices of          Increasing rapidly                      1.1      0.0     0.0     0.0     0.0
industrial properties?                              Increasing moderately                  30.1     18.7     4.3     0.0     3.7
                                                    Holding steady                         60.2     74.7    77.4    62.0    64.6
                                                    Decreasing moderately                   4.3      5.5    11.8    31.0    29.3
                                                    Decreasing steadily                     0.0      0.0     2.2     2.0     1.2
                                                    Not sure                                4.3      1.1     4.3     5.0     1.2
How common are leasing concessions (such            A lot more common                       0.0      0.0     2.2     7.0     3.7
as free rent, tenant finish, build out, etc.) for   A little more common                    3.2      9.9    22.6    35.0    31.7
industrial space now compared with 6                About the same                         67.7     70.3    61.3    41.0    48.8
months ago?                                         A little less common                   12.9      2.2     2.2     2.0     2.4
                                                    A lot less common                       0.0      3.3     0.0     0.0     0.0
                                                    No concessions are offered              6.5      3.3     2.2     5.0     4.9
                                                    Not sure                                9.7     11.0     9.7    10.0     8.5
What would you say is the general condition         A lot better                            0.0      1.1     0.0     0.0     0.0
of the industrial market now compared with          A little better                        19.4     12.1     3.2     1.0     2.4
6 months ago?                                       About the same                         73.1     75.8    71.0    49.0    56.1
                                                    A little worse                          5.4      9.9    22.6    45.0    36.6
                                                    A lot worse                             0.0      1.1     3.2     5.0     4.9
                                                    Not sure                                2.2      0.0     0.0     0.0     0.0
MARKET DISLOCATION a
Assess foreclosures of commercial real              Much more now than 6 months ago         0.0      0.0     0.0     0.4     0.0
estate loans as a potential sign of a troubled      Somewhat more now than 6 months ago     5.1      7.1    12.0    18.5    17.9
real estate market and rate your assessment         About the same                         64.7     69.3    69.7    63.4    60.7
at the present time compared to 6 months            Somewhat less now than 6 months ago     7.7      2.5     4.4     1.6     1.7
ago.                                                Much less now than 6 months ago         0.8      0.4     0.0     0.0     0.0
                                                    Not sure                               21.7     20.6    13.9    16.1    19.7
Assess commercial and retail bankruptcies           Much more now than 6 months ago         0.0      0.4     0.0     1.2     0.9
as a potential sign of a troubled real estate       Somewhat more now than 6 months ago    13.2     21.0    31.9    39.8    35.8
market and rate your assessment at the              About the same                         59.2     53.8    49.8    44.5    42.8
present time compared to 6 months ago.              Somewhat less now than 6 months ago     7.2      5.0     2.8     0.8     1.7
                                                    Much less now than 6 months ago         0.4      0.0     0.0     0.0     0.0
                                                    Not sure                               20.0     19.8    15.5    13.8    18.8
Assess the length of time to lease a property       Much more now than 6 months ago         0.0      0.0     1.6     2.8     0.9
as a potential sign of a troubled real estate       Somewhat more now than 6 months ago    12.3     19.3    36.3    54.3    47.6
market and rate your assessment at the              About the same                         55.3     55.0    39.8    24.4    31.4
present time compared to 6 months ago.              Somewhat less now than 6 months ago     9.4      2.5     1.5     2.0     2.6
                                                    Much less now than 6 months ago         0.4      0.0     0.0     0.0     0.0
                                                    Not sure                               22.6     23.1    20.7    16.5    17.5
   a The results for this section were recalculated to reflect the removal of survey responses that did not answer these ques-
tions, which were previously included in the “Not Sure” response.




  July 2002                                                      11                               Survey of Real Estate Trends
                                               NOTES:
1) These results aggregate responses filed for 73 major and non-major metropolitan markets cov-
   ering every state except Alaska, Idaho, West Virginia, and Wyoming. The number of respon-
   dents by property sector was: single-family (229), multifamily (157), office (168), retail (137), and
   industrial (82).
2) Respondents reported on the following major and non-major metropolitan areas: Albany,
   Albuquerque, Atlanta, Austin, Baltimore, Bergen-Passaic, Billings, Birmingham, Boston, Buffalo,
   Burlington, Charlotte, Chicago, Cincinnati, Cleveland, Columbus, Dallas, Denver, Des Moines,
   Detroit, Fargo, Fort Lauderdale, Fresno, Grand Rapids, Greenville-Spartanburg, Hartford,
   Honolulu, Houston, Indianapolis, Jackson, Jacksonville, Kansas City, Las Vegas, Little Rock, Los
   Angeles, Louisville, Memphis, Miami, Milwaukee, Minneapolis, Nashua, Nashville, Newark, New
   Orleans, New York City, Norfolk, Oakland, Oklahoma City, Omaha, Orange County, Orlando,
   Philadelphia, Phoenix, Pittsburgh, Portland (Maine), Portland (Oregon), Providence, Raleigh,
   Richmond, Sacramento, Salt Lake City, San Diego, San Francisco, San Juan, Seattle, Sioux
   Falls, St. Louis, Stamford, Tampa, Tulsa, Washington, DC, West Palm Beach, and Wilmington.
3) Survey respondents were asked to assess current real estate market conditions as compared
   with six months ago in relative terms: A lot better: Market conditions have improved consider-
   ably. There are strong, visible signs of improvement in terms of vacancy rates, market prices, or
   the pace of sales. Moreover, there is general agreement among market observers on this
   improvement. A little better: Market conditions have improved slightly. There are some visible
   signs of improvement in terms of market prices or the pace of sales. However, there need not be
   general agreement among market observers on this improvement. About the same: Market
   conditions are essentially unchanged from what they were six months ago. A little worse:
   Market conditions have deteriorated slightly. There are some visible signs of deterioration in
   terms of market prices or the pace of sales. However, there need not be general agreement
   among market observers on this deterioration. A lot worse: Market conditions have deteriorat-
   ed considerably. There are strong, visible signs of deterioration in terms of vacancy rates, mar-
   ket prices, or the pace of sales. Moreover, there is general agreement among market observers
   on this deterioration. Not sure: Unable to assess the current market conditions due to inade-
   quate information, conflicting information, or for other reasons.

				
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